Prepayment Update - April 08

A Look at Recent Non-Agency Prepayment Speeds
by Sanjeeban Chatterjee

In this article we look at prepayment speeds for non-agency prime and subprime mortgages through January 2008. Prepayment speeds here represent total termination speeds and include both voluntary and involuntary prepayments. Data in this study was obtained from Intex.

Sub-Prime ARM
Chart 1 shows the aging curves by quarter of origination for sub-prime 2/28 hybrids. It is interesting to see how much the 12-month and the first reset peak has gone down as we go from 2004Q1 to 2007Q1 origination. Chart 2 shows that the first reset peak has gone down from about 90 CPR for the 2004Q1 origination to about 30 CPR for the 2006Q1 origination. Chart 3 shows that the 12-month peak has gone down from the mid 50’s CPR for 2004Q1 origination to below 10 CPR for the 2007Q1 origination. This shows that sub-prime ARM borrowers are having a harder time finding refinancing and credit-curing opportunities.